If you have existing lending you need to manage your bank during these times. When the news is so negative, credit managers are lying awake at night imagining doomsday scenarios for the business clients that they have approved loans for. Now is the time to give these credit managers some comfort that you are on top of your game, even if the news is bad. Here are some points to consider:
- Play out the likely scenario for the bank – this needs to provide risk analysis across all facets. Identify the risks and then tell them what you are doing about it:
- Suppliers – will you maintain sufficient supply of product to continue trading? Can you source from multiple places if one source shuts their operation?
- Customers – are your customers going to continue to buy if they are stuck at home for weeks. Does this apply for all products and all markets. What can you do to expand your sales? Are there positive sales opportunities to come from this crisis?
- Competitors – do you have the chance to get ahead of your competition through this? How are others in your market reacting and what are you doing differently that your clients will recognise and appreciate?
- Reputation – what happens to your business if you go down? What are you doing to ensure longevity of your reputation?
- Staff – what happens to your business if key staff go down? Do you have plans to protect your staff health?
- Business Continuity – If you have a BC Plan then point to it and show the lender who your plan deals with this scenario. If you don’t have a plan, put one together, and then show the bank. They have such plans and they expect you to have one too (rightly or wrongly).
- Amend your forecasts – now is your chance to recast your numbers and change your lender’s expectations. Show the bank what the likely consequence of any “headwinds” will be. If you can afford your repayments regardless, give them this comfort. If there is a scenario that would see you struggle, now is the time to ask for help – before it happens. The banks are under pressure to be conciliatory in this environment. If you give them warning they will likely be much more supportive than if you surprise them down the track.
- You need to know how long you can endure a subdued performance – Perhaps your Accountant can assist with this. If you do see an impact coming (or are already experiencing an impact) you need to show, in a financial model ideally, how long you can last based on your current income and expense commitments. Give yourself and your lender as much warning about how close or far “doomsday” is so you give yourself as much time as possible to do something about it. Look at the commitments you have and determine which ones can be deferred or cancelled. Look at your sales pipeline and work out what you might be able to pull through faster.You then need to be able to show how long it would take for you to get back on track. Often with these sort of events it is possible to last through the main challenge period, but the repercussions last way after the event is over. If you are deferring expenses until the event ends, these expenses aren’t going away. You will still have them for a period of time afterwards and you need to show your lender (and yourself) how long it will take before these deferred expenses are all caught up.
- Reiterate how good the world will be once this is over – In the heat of battle you and your bank can lose site of the positives. A bank is much more likely to hold strong and be supportive when they know that the end result will be extremely positive. They want to back winners. Show them why you are a winner!
If you need help, feel free to arrange a teleconference or webinar and we can work through the issues with you to ensure you get this important communication right. We wont charge for this. We have band together to get through this challenge!